Good day, ladies and gentlemen, and welcome to the 2020/2021 half-year results conference call of Ypsomed. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. I would like to introduce your host for today's conference, Mr. Thomas Kutt, Head of Investor Relations. Sir, the floor is yours.
Thank you, Olivier. Thank you very much. Good day, ladies and gentlemen, and thank you for joining us for our 2020/2021 half-year earnings call. Joining me today is Simon Michel. Our press release report and presentation discussing our results and business performance is also available in the media investor section of our website. With that, I will turn the call to Simon. Simon, please.
Thank you, Thomas. Ladies and gentlemen, a very warm welcome from Burgdorf, Switzerland today. Corona shows and proves how robust our business model is and how privileged we are. Our business model has proven itself. Our products are vital for people with chronic disease. Infusion sets for pump users are required every three days and devices as well. Our processes, as you know, are highly automated and vertically integrated, so our manufacturing has never been interrupted. Our supply chain towards customers, towards our clients, has been ensured at all times. Our core strategy and our focus are realigned. The market is right, and therefore we continue to pursue our growth path. Yes, we have grown a bit less than expected 12 months ago, but we have grown at 4.6% and currency adjusted at 6.8% even.
This has also shown, and it is also being reflected, that we have created over 100 new jobs during this crisis. We have added people, especially in the area of software engineering and production, and less so in administration, as you may see from the figures. Ypsomed focused aligned on the following four strategic initiatives, as we have shown before, Expansion, Innovation, Operational Excellence, and Sustainability. In the area of Expansion, we extend the reach to pharma biotech companies on a global scale, and we are working intensively on the U.S. pump access. In the area of Innovation, we go through a digitization exercise for most of our products. We save costs on lean manufacturing. Our Lean Transformation Program in all manufacturing floors are very far and lead to our cost leadership.
As you know, we have committed to become CO2 zero carbon net zero by 2030, a commitment which has been very well received by our pharma clients that are in a similar position under pressure from society and from politics. What have we achieved in the last six months in those four strategic areas? As you may have seen this morning, our sales growth of almost 22% year-on-year in injection systems is just phenomenal. We are extremely motivated that we are able to actually fulfill our commits in less time than we have told you two and a half years ago. We basically have doubled injection systems in two and a half years, and we are going to double it again in the coming three years. This is clear proof that our platform program works.
On YpsoPump, we are very close to finalizing a very important partnership in the U.S. for the distribution of YpsoPump. We hope to be able to communicate it in the coming weeks. The day today, the 3rd and 4th of November, are quite full with topics in the U.S., so we have decided to move it up a bit. On an innovation level, we are on track with our Loop program, i.e., the integration of Dexcom into our mylife app, mylife YpsoPump system. We have also been able to secure two YpsoDose cases. YpsoDose is the large volume injector in the area of Ypsomed Delivery Systems. A very interesting new field, devices that will make us very happy in five years from now, a new class of devices, we call them large volume injectors, LVI, very lucrative mainly in the area of oncology.
We have been doubling the capacity on Ypsomed by installing two lines in Schwerin in Germany on new sites, and we are delivering at the moment our large infusion set line in Schwerin, so the 10 million infusion set capacity line, so we are no longer dependent from the Mexico factory. As you may have seen, we have introduced Ypsomed Zero, our zero option, as we call it. It's an option that our pharma clients can choose, and we sell it, and we ensure that the products are carbon at zero that they are getting from us. This growth is also shown and reflected, of course, in our investments. Interestingly, as you see, we spend less money in concrete and steel, but more so in software and intangible assets, and that's very important.
We basically move our investment from infrastructure into R&D and software into future business. In order to achieve this, we have been able to increase our short-term credit line with our bank slightly from CHF 210 million to CHF 265 million. Also my family has decided to extend it and the credit line by CHF 45 million to CHF 55 million. Now we are in a comfortable situation that we can finance all these investments in R&D and in production capacity.
As you know, we have to pre-finance the Ypsomed and pen and all these lines, and this requires capital. This is now possible without further discussions with banks. We've also decided to relieve Ypsomed a bit from large programs, and we have decided to sell YpsoPod, the program. It's our patch pump program where we have invested so far roughly CHF 9 million. We sell it for CHF 13 million to TechMed.
TechMed is a company which is 100% controlled by my father. It basically sells the development program into our family. It's a small gain here on Ypsomed side. We have been discussing that with our revisor, and they have said it's okay, how we did the calculation. We basically do it to relieve Ypsomed in order to focus. It's a CHF 75 million additional program, which is required for this product until we can deliver to the market. Importantly is to know that we have decided on an earn-out clause and also the possibility to buy it back once it's finalized and developed and ready to market in 2024. It basically all stays the same. We simply finance it no longer out of our company, but our family, and we take the responsibility to support here in these times because we don't want to stop it.
We are convinced it is a very important product for the market. YpsoPump is a very nice alternative to the Omnipod. It's the same disposable concept, as you know, which has a cost benefit, and we don't want to stop it. We decided to finance it externally. That's what we will do, and we move it over in January 2021. COVID-19. What are the effects on our business? Let's start with Ypsomed Delivery Systems. Basically zero. We have no real effect. Operating business is running. We are delivering products. Some companies are even ordering more in order to have stock, you can imagine. Some few products have a small delay in introducing them because some hospitals don't allow sales force from our pharma partners in their offices.
All overall, we are very happy that we can deliver and that we can continue the business on a very stable manner. Just as a reminder for those of you that are new with us, our platform device strategy is really the core key for the success in Ypsomed Delivery Systems. Such a constant high growth in this area is only possible because we have done our upfront investments. We started that already eight, nine years ago. We have started by investing in platforms, products such as auto-injectors and disposable pens. We have installed manufacturing capacity, and we will go on to install manufacturing capacity. It's basically something we have to do upfront in order to sell products and just customize them, support the studies, and bring them to the market.
This platform device strategy is the reason why we have this technology leadership and the cost leadership at the same time. We are so focused on not changing too much on the product that we can actually profit from scale effect. The scaling effects lead, of course, to lower cost. We can have several clients on one line, which is very efficient working with large tools. On diabetes care side, we are of course lucky in our situation that we can continue to deliver infusion sets and strips. Patients on a pump, they use these products. You don't go off the therapy just because of corona. You continue to use your disposables. This is very similar to what Medtronic and others go through, we cannot really put many more patients on the pump.
We have calculated 800-1,000 patients per month average, we are rather at the 300 per month average, which is of course too low. Those patients are simply not able to talk to us because Ypsomed and also the other pump companies, we are not allowed to join the hospitals, the offices, and actually talk to the people. What is important to know, we use the time in order to catch up. To catch up on technology side by introducing the mylife Loop, those elements, by doing the integration of Dexcom, it's a very important piece for our customers. By basically catching up to Tandem and Medtronic during the time. We're kind of in a good position that we can use this situation that the virus gave us in order to do our homework.
Just to give you a bit more details on what is happening here in Europe. Basically, Germany and Switzerland are in quite a comfortable situation. Germany and Switzerland works with specialized practices, so diabetic practices, diabetologists. You can basically visit them with a mask, it works. Most hospitals in the U.K. and France and Italy are really shut down. It's difficult to get appointments with clients that are interested in a pump. Also tenders in the Nordics, for instance, and Eastern Europe are postponed. There is a pent-up demand, and we see this wave. We see the prescriptions waiting. We have trainings lined up, and we don't simply know when this will be. Will it be in spring? Will it be in early summer? We don't really know.
This is the main reason, basically, why it's difficult for us to give an exact figure. We clearly see a slight increase on top line in sales, and we definitely see further growth in operating profits. The second half is still growing and all in all, we will definitely have a better result than in 2019/2020. It's difficult for us to tell you where we are ending, simply because of we don't really see yet how many patients in Q4 we're being able to put on the pump. We continue, of course, our very strict cost control in operations especially. We have seen that we are down to 5.2% administration cost, and my clear goal is to be below 5%, as you may know. This is a clear focus of my team here to take out cost, unnecessary fat.
It's a good moment to dig in again and to stop initiatives, stop products, stop elements which are not really, really core. This is something where we will get a very strong support from our employees, especially when we still hire people. It shows that we have a clear focus on what we do. Important for you to know, we are still crystal clear and convinced that medium-term EBIT target of CHF 100 million is achievable. This is 3.5 years. It moves out a bit eventually now because of the delay of putting patients on a pump, but it is clearly seeable in our mid-term planning. Doubling Delivery Systems by itself will bring us most of CHF 100 million in this segment only. All we have to do is to get to a black zero in pump business in order to achieve this result.
When we go a bit more into the details on top-line revenue, we see this 4.6% growth in sales, and it's clear now that YDS is the strongest revenue driver. The delivery system segment, as you may know, is part of injection systems. That's our own business, our own developed pens and the contract manufacturing business. This combined segment is growing at 18.9% last half year, while the diabetes care overall has declined 8.9%. This is mainly due to the pump. Let's first go into a bit more detail on delivery systems. In the last two years, they have grown at 59%, 22% growth in injection systems. It's a very high margin business where we are basically going up. It's just [audio distortion] out there, and there's nobody really left. This is a situation we can really profit from.
We can keep our pricing up. We charge in most of the cases in Swiss francs. We don't have the currency effects in this business. A very comfortable situation for our auto-injectors, for pre-filled syringes, and our disposable pens for cartridges. Contract manufacturing is growing, and that's very motivating. As you have heard, we have been able to extend the partnership with Sanofi. We are able to double the capacity, and we are in this growth mode at the moment, and we make money with contract manufacturing. That's important. We add a lot of effect here to our fixed cost, which supports, of course, our overall infrastructure and depreciations. On diabetes care side, this total of 8.9%, it's combined of pump. In pump, we have a decrease, decline of 13.7%.
That's not a lot compared to some of our competitors, but it is, of course, due to less new patients on the pump. That's a little issue we know, but it's not really lost. It's basically a delay. On needles, we had a bit lower sales because of less needles in America. At the moment, we are heavily working on filling that volume in 2021 again. Then DiaExpert test strips is mainly a currency effect. Of course, test strips are a bit lower, but on a very low volume because of CGM new technology. I'd like to end the figure discussion here with EBIT and bottom line. It's solid, basically almost on the area where we have been the year before. We have added CHF 8 million in growth and efficiency gains through our lean manufacturing and lean transformation program.
We have CHF 5 million less compared to last year because of a one-off license agreement that we have been able to book into our books, our P&L last year. Net, it ends up at plus CHF 3 million. We have a CHF 4 million effect on the depreciation area, especially for capacity, that now is ready and there and starts costing and putting a cost on our P&L, mainly due to now the fully operating and live machinery in sight. With that, I would like to dig in a bit into our business areas, and I would like to start with Ypsomed Delivery Systems. In Ypsomed Delivery Systems, you may have read six weeks ago, we have launched a zero option, the Ypsomed Zero Initiative, the first zero carbon emission auto-injector that's been extremely well received, I can say, by global big pharma biotech.
The industry clearly realizes that Ypsomed is here in the innovation lead, that we are showing the industry where we have to go next. It's not only digital, it's also green. It's in a very important element because most of our pharma customers, they get the pressures from their investors, from their governments, from their clients, from their end users. We are putting here a very strong signal and support in our industry and make it very difficult for our two remaining competitors to catch up with us. How do we do that? Basically, twofold, by substituting and by offsetting. Substitution means that we are changing material. Basically taking the oil-based plastics and then exchange them through biopolymers. It is polymers that are coming from plants, sugarcane and stuff like that, and also recycled plastics.
We exchange the parts and lower the carbon footprint just by changing the material. We're also working on many initiatives on circularity, i.e., taking trays back, pallets back, taking packaging back, not throwing it all away after shipping. It's clear, with substitution, we can only do roughly 50% of carbon emission reduction. The rest we are going to offset. We're doing that by buying certificates from the market, but also by creating our own certificates. As you may know, we have started three years ago in the Maasai Mara, so near the national park in Kenya, a very large reforestation program. In 2022, we are going to be able to deliver our first own certificates, which will support us on really bringing us down to net-zero.
That you, as I've said initially, as a group, we want to be net carbon zero by 2030 latest in order to support the Kyoto and Paris initiatives. It's not only green, it's also volume. This is an actual picture actually here last week, which shows the two new lines for UnoPens in our new site in Hall B. On the left side, this is a 20 million capacity for UnoPens, two lines, including over 20 plastic molding machines. It's being installed now, and after Christmas, we are going to see the first test run, so we can start manufacturing out of Germany in Q1 calendar year 2021. When you look at our order pipeline, it is extremely strong. We have added in the last six months as many new projects as in the entire previous business year. That's extremely remarkable.
At the moment, we have roughly 50 open injector variants and 60 disposable UnoPen variants under customization. Some of them now move into the studies. Some are already in the registration FDA phase. This big wave is coming closer to market. In the next three to four years, we will see dozens of launches every year of new products, new drugs. It's not only diabetes, it's many interesting molecules that will enter the market and support and relieve patients with chronic disease. With that, I would like to move over to diabetes care. Diabetes care, of course, most of you are interested, so what is Ypsomed doing in America? We are in discussions and very extended discussions with a distribution partner that we're going to announce hopefully in the coming weeks, not months.
We have a clear understanding that Ypsomed is not going to have its own brand in America, its own sales organization, its own processes. We're going to have a small organization that will support in second-level support, in regulatory support, and logistics. Ypsomed will be the registrar. We are going to register the product in a two-step process towards ACE with the FDA. Step one, in June-ish 2021, we are going to enter the dossier for the YpsoPump, and YpsoPump is going to become the predicate device for the ACE interoperable approval, which we're going to hand in December-ish Q4, Q1 latest 2022. We're going to have a market launch by mid-2022. In America together with our partner. We are extremely motivated to do that. There's now a very clear view. It gives Ypsomed a relief on the bottom line.
We don't have to do upfront investments. We basically build an OEM business relationship in the mylife and the diabetes care space. Similar to what we do today in the pen and autoinjectable, we now do the same thing in the pump. I think it's a very wise decision to collaborate with a strong partner, a strong distributor, a diabetes insider. Outside of the U.S., we are basically fulfilling what we have to do. Our duty is our Loop program. Our Loop program, just as a reminder, it consists of three elements. It's the mylife Assist, it's a Dose, and a Loop. The mylife Assist is integrating Dexcom G6 into our mylife app in the 17 language version, Android, iOS, et cetera. This is well underway, and we're going to launch it beginning of the year. mylife Dose is the bolus button.
It is the long-awaited killer app. It is the feature that every diabetic wants. It's basically steering your pump with your mobile phone by giving your bolus in the restaurant at home without showing everybody you have a pump. That's the core piece which will be launched in June 2021. Depends on country, version, and language, of course, but we are well on track there as well. In parallel, we work on Loop. Loop is integrating TypeZero into our app, into our control app. In order to have a controller-enabled pump as well, as Medtronic and Tandem do. It will help bring people into range, we expect to launch that end 2022, beginning 2023. Depends a bit on MDR and whether we have to do a larger or smaller study only.
This is just a reminder here on mylife Assist. Some of you may not know G6. This is the piece of the Dexcom at the center, a great product. It's a continuous glucose monitoring system, which you put on your arm, your abdomen, and it measures continuously the glucose values. It sends them via Bluetooth to the mylife app. You can see the values online on your phone. It gives you a bolus advice. You can then give your bolus from the pump. The pump, of course, is connected as well. As the next step, mylife Dose, you can imagine you give your bolus directly from the phone. You no longer have to touch the pump.
Important to understand here is also the doctor now finally has all data at a glance, the BGM, CGM data, and the pump insulin data. They also support a much better therapy during the time. We are also ramping up the capacity for infusion sets by installing the 10 million line in Schwerin. It is being delivered right now. We are going to be live without production in the second half of 2021 after summer. At the moment, we have enough capacity out of Mexico. It is clear we have to ramp it up. This program is well underway. It is an enormous line that we install there, including all necessary plastic molding capacity. It is something we can do. It is a core competence, as you know, manufacturing excellence.
Just as a last element, what happens on mylife with the Explore app, we have used the time to work on a digital side in order to introduce training tools in this time when we cannot see patients, when we cannot see clients. We have launched just a couple of weeks ago and pushed it up into the Android and iOS shops in the various languages, our so-called Explore app. The Explore app is explaining you the pump, how it works. You can really go through a model, you can take tests. It gives you a clear feeling, and then you can get into contact with our offices in the various countries in order to ask questions, et cetera, to understand how the product works and to get acquainted with the therapy. A very helpful tool that we have now delivered in these special times.
In order to do these things, also in the future and in a very robust and clear way, we have started to build up our regional hub in Barcelona. Next to our software engineers in Burgdorf and Köniz in Switzerland, we are now building up in Spain our hub. We have 50 people now. We're going to be roughly 40 people in 18 months from now. Eventually, we will be more. The speed we are adding people here is excellent, and we are very pleased with the quality of the software engineers in Spain. Zero carbon emissions. Our sustainability program, of course, is not just to exchange material in our devices. It's also doing our homework on the infrastructure side. We have added, for instance, photovoltaic on all the buildings.
We have kicked out gas heatings and reuse our own heat that we generate from our plastic molding machines, our pressure lines. We have also now added silos. A new interesting concept that supports us in bringing plastic granulates into the factory without using the space of the factory and without generating waste out of pallets and carton plastic. We have trucks coming here a couple of times per week, filling up these huge silos that bring the plastic into the factory directly onto the plastic molding machines without a lot of handling. It's a much leaner and environmentally much more friendly process. With that, I would like to come to my last two slides, and I would like to just reflect a bit on lasting effects of COVID-19.
Ypsomed self-care solution, that's our claim. A COVID pandemic clearly shows that we are here in the center of these needs. People want to treat themselves at home. We are not allowed to leave our home. Home care becomes an essential part of life. Ypsomed has been there since its inception. Home care and self-care is becoming more and more relevant, even during that time. We are convinced that this will stay like that. We are more open now to do the therapy in our four walls. Digitization, of course, with our decision a couple of years ago to make our devices digital, we have done what is required now because doctors can be in contact with the patients easily by having access to the pump patient data, the data from the injections.
This is why we are continuing and are convinced that we have to continue to invest in digitization even after the crisis. Affordability, something that we have been talking about for many years. Now we see the world is getting a hit, and there will be less money around in the healthcare environment in the future. We have to do our homework. This is why our lean program, our lean manufacturing, our scaling effect pay off. We want to deliver at Ypsomed an affordable product that can be used by patients with chronic diseases all over the globe, not just in the Western world. The supply chain. We are delivering products through our existing, very stable supply chain. We have done our central warehouse in Europe. It's an SAP-based company, so all systems are in place. There's no further work there.
This is de-risked for our clients, and during the whole crisis, there has not been one single interruption of the supply chain. This is something we master very well. What we have also seen during that time, that partners are willing and able, and we are together with them, willing and able to make pragmatic and innovative deals. I mean, the Dexcom partnership and also a partnership that we're going to announce soon in America, is mainly done without seeing each other face-to-face. It's all done via Zoom and Webex, and it just shows that if there are partners that want to make it happen, it can happen. We get closer via digital means also in the space of collaboration. Ypsomed makes self-care simpler. This is Ypsomed. It is what we do. It's eight pieces. It's pen needles, BGM infusion systems, and therapy management.
It's our core in the managed and needed care world, our B2C business. Of course, our pen autoinjector, patch injector, and data business, where we are the market leader in systems and devices for pharma and biotech clients. With that, ladies and gentlemen, thank you very much for listening. I would like to hand over the board now to Thomas to start the Q&A. Thomas.
Thank you. Olivier, please open the line for the Q&A.
Dear ladies and gentlemen, we will now start with the Q&A. If you wish to ask a question, please press on the telephone keyboard star 14. I repeat, star one four. If you wish to withdraw your question, please press star 15. I repeat, star one five. There are several questions coming up. I will open the lines one by one. At your turn, you will hear the announcement unmuted on your line. I kindly ask you to introduce yourself with your and your company's name. Thank you very much. The first person is already unmuted. Carlos Moreno. Carlos Moreno, you are unmuted for the question. Very well. We will go to the next question.
Good afternoon. It's me now on the line. Sibylle Bischofberger from Bank Vontobel. I have two more questions after the last conference call. The first is about YpsoPump you decided to give to TechMed. You mentioned that you will achieve a profit of around CHF 4 million. Just to understand, was it booked in the first half? Will it book in the second half? Where will it book? This is my first question.
Thank you, Sibylle. YpsoPump is going to happen in the second half. We are going to sign the sale of the program in January. It will be 100% in the second half. It will be booked under financial income. It's not in the EBIT below. Is that correct, Thomas? Niklaus, do we book the YpsoPump profit in the EBIT or in the financial income?
In the EBIT.
Oh, directly in EBIT. All right.
Other operating income.
Under other operating income. When we talk about slight increase in operating income, in operating and EBIT in our guidance, then we mean this without this selling YpsoPump. This is additional to our regular guidance.
That's helpful. The other thing is about the pen needles. I understand that the sales were decreasing quite heavily. Was the EBIT still positive?
Yes, it is increasing quite heavily. There are around 100 million pen needles, so it's about 1/5 of all pen needles. Roughly that we are selling less in the U.S. The U.S. pen needles, as you can imagine, have not been with the highest margin. From that perspective, the effect is not so big. Of course, because we sell less needles, we have less adding to our fixed cost. Overall, I think pen needles have been negative simply because it's the overall that is care infrastructure with sales organization that build cost and we assign cost from the countries to all the different four business areas in diabetes care. That sector has been negative, it's a matter of time and will be positive again.
As I said, we will substitute this reduction of sales very soon. Yes. It's a question of time.
Thank you very much. The last question, just when I calculate your figures with my divisions and units. I understand that the YpsoPump, it's attractive to me that sales were higher than the negative EBIT, the unit sales. Meaning if you had, let's say, CHF 10 million times the EBIT was lower than CHF 9 million or higher, a bigger number.
I didn't quite get the question. There is more echo here. Maybe you can quickly go on mute on your phone, and I try to repeat the question. You're asking whether the EBIT on the pump has been bigger than the total revenue of the pump?
Right.
Additional cost for the.
We don't really disclose this, Sibylle.
That's fine. It's just to follow up, then I try to ask this question.
We have a big loss for YpsoPump because we have depreciation already there in now for production sites in Schwerin. Last year from beginning of the 1st of September, from now on, we have all the infrastructure, all the clean room, all the machines are already there in and we have about, what was it, I would mean about CHF 2.8 million to CHF 3 million additional depreciation, which is allocated to YpsoPump at the moment. That's why we have a big loss year for YpsoPump. I would say that the small less difference between this year and previous year. This is mainly this additional cost for infrastructure.
Thank you very much.
Very well. At this point, we do not have any further questions.
Okay, excellent.
Oh, sorry. We just received another question, if that is okay.
Oh, please. Please free.
Very well.
Hi, it's Carlos from Premier Miton. I'm sorry, my assistant had the mute button. I just wanted to ask on the pod again, was the reason to move that into private development, was that purely to save the P&L? Is it a purely financial move, or can it be developed faster, better in the private hands? Thank you.
Carlos, thank you for the question. It's definitely mainly a financial topic to leave Ypsomed, but in a world of spin-out, you can imagine, and it is also my expectations that the team is going to work more independently. They are all basically staying in our offices. It's all the same people. It's 35 people working on the program. Plus, they are probably a bit less disturbed by corporate stuff. My expectation is that our program over there is going to use its freedom in order to be quicker and more brave in decisions. [crosstalk]
We have no further questions at this time.
Thank you, Olivier. For sure, please, to all participants, please do not hesitate to contact us anytime for additional information. We are here to support you. We really try to be transparent, and we are open to all your questions. Thank you for joining us today. We look forward to our next call very soon, and stay healthy. Operator, please close the line.